A foreign currency swap occurs when two parties agree to exchange interest payments and the loan principal in different currencies. They help companies and investors lower borrowing costs, access better interest rates, and protect against changes in currency values and interest rates. Fixed-for-fixed, fixed-for-floating, and floating-for-floating swaps are common examples
How Do Foreign Currency Swaps Work?
One purpose of engaging in a currency swap is to procure loans in foreign currency at more favorable interest rates than might be available when borrowing directly in a foreign market.